Food and non-alcoholic beverages (up 2.9 per cent),alcohol and tobacco (up 6.7 per cent) and recreation and culture (up 3.2 per cent) were the biggest contributors to higher inflation,partly offset by electricity (down 21.5 per cent) and automotive fuel (down 10.2 per cent).

Underlying inflation – a measure which strips out irregular or temporary price changes – dropped to 3.2 per cent in the year to November,down from 3.5 per cent in October.

The Reserve Bank has said it will not start cutting rates until it is confident that underlying inflation is returning sustainably towards its 2 to 3 per cent target. Following its final meeting of 2024,where the bank held interest rates steady at 4.35 per cent,RBA governor Michele Bullock revealed the board wasincreasingly confident inflation was coming under control.

Ahead of the release of the figures,Capital.com senior financial markets analyst Kyle Rodda said markets would be focused on the underlying read because the headline figure had been “muscled lower” by state and federal government electricity rebates.

While the monthly inflation figures provide insight into the magnitude of price pressures in the economy,the Reserve Bank will be more concerned about the quarterly inflation figures due at the end of the month.

ANZ senior economist Catherine Birch said an unusual monthly fall in new dwelling construction costs of 0.6 per cent would have a “material impact” on fourth quarter underlying inflation,given the category accounts for about 8 per cent of the inflation gauge.

EY senior economist Paula Gadsby said November inflation,which had a bigger focus on services,showed persistent price pressures.

“Household budgets continue to be squeezed by rising prices,particularly for essentials,” she said. “In annual terms,food prices remained a key contributor – especially fruit and vegetables. Rents continue to rise at an annual pace of over 6 per cent,reflecting tight markets around the country.”

With lacklustre productivity growth,a resilient labour market and strong government spending posing further risks for inflation,the Reserve Bank could keep the cash rate at 4.35 per cent for the first few months of the year,Gadsby said.

Meanwhile,jobs data released by the ABS on Wednesday showed there were 344,000 vacancies in November last year,up by 14,000 from August – the first quarterly increase since May 2022,when vacancies reached their historical peak.

While the number of vacancies remains 130,000 jobs lower than in May 2022,it is still about 117,000 jobs higher than before the pandemic,with 14 of the 18 industries recording higher vacancies.

The ongoing high level of vacancies reflects continued labour shortages in many industries,with November labour force data from the ABS showing unemployment dropped to 3.9 per cent as more people found work.

It also points to continued tightness in the labour market,which the Reserve Bank uses as another gauge on top of inflation to determine the imbalance between demand and supply in the economy. The higher job vacancies and continued low unemployment could keep the bank cautious about cutting rates.

Moody’s Analytics economist Harry Murphy Cruise said the November inflation data was broadly good news for those hanging out for interest rate cuts,but that an uptick in job vacancies would give the RBA reason to take a cautious approach.

“The rise in job vacancies suggests the labour market is tightening,with firms finding it harder to hire talent,” he said.

“The bulletproof labour market is already a key concern for the RBA,with the board noting that a rise in unemployment will be needed before it is confident enough to cut rates.”

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